Nii Tetteh - Investor Relations Stacy McLaughlin - Chief Financial Officer, Vice President Tom Brisbin - President, Chief Executive Officer, Director Mike Bieber - Senior Vice President, Corporate Development

Al Kaschalk - Wedbush Securities Wyatt Carr - Monarch Bay Abhi Ramesh - Apollo Adeeb -

Good day, and welcome to the Willdan Group Incorporated Third Quarter 2015 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Nii Tetteh. Please go ahead.

Thank you. Good afternoon, everyone, and thank you for joining us to discuss Willdan Group's Financial Results for the third quarter ended October 2, 2015. With us today from Management are Chief Executive Officer, Thomas Brisbin; and Chief Financial Officer, Stacy McLaughlin. Management will review prepared remarks, and we will then open the call up to your questions. Statements made in the course of today’s conference call, which are not purely historical, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements involve certain risks and uncertainties, and it is important to note that the Company's future results could differ materially from those in any such forward-looking statements. Factors that could cause actual results to differ materially and other risk factors are listed from time-to-time in the Company’s SEC reports, including but not limited to, the Annual Report on Form 10-K filed for the year ended January 2, 2015. The Company cautions investors not to place undue reliance on the forward-looking statements made during the course of this conference call. Willdan Group Inc disclaims any obligation and does not undertake to update or revise any forward-looking statements made today. With that, I will now turn the call over to Chief Financial Officer, Stacy McLaughlin. Stacy?

Thanks, Nii. I would like to add my welcome to those joining us on today’s call. In addition to GAAP financial results, Willdan also provides non-GAAP financial measures that we believe enhance investors’ ability to analyze our business trends and performance. Our non-GAAP measures include revenue net of subcontractor costs and adjusted EBITDA. We believe revenue net of subcontractor cost allow us for an improved measure of the revenue derived from the work performed by our employees. EBITDA is a supplemental measure of operating performance, which removes the impact of certain income and expense items from our operating results. GAAP reconciliations for both of these non-GAAP measures are included at the end of the earnings release we issued today. I'll start with an overview of our income statement, then our balance sheet and finally our guidance. Total contract revenue for the third quarter of 2015 increased 18.9% to $33.5 million from $28.2 million for the third quarter of 2014. The two firms we acquired in January 2015, Abacus and 360 Energy contributed $7.2 million in contract revenue for the third quarter of 2015. Excluding the impact of the two acquisitions, we saw year-over-year organic revenue growth in all of our segments with the exception of Energy Efficiency Services. By segment, including both organic and acquisitive revenue, Energy Efficiency Services increased 30.9% to $17.8 million. Engineering Services contract revenue increased 4.5% to $11.6 million. Revenue from Public Finance Services increased 16.4% to $3.3 million and Homeland Security Services revenue increased 16.2% to $830,000 in the quarter. Revenue net of subcontractor cost increased 8.9% to $24.1 million compared with $22.2 million for the year ago quarter. Direct costs of contract revenue were $21 million for the third quarter of 2015, an increase of 27.2% year-over-year. The increase was primarily the result of incremental direct cost of revenue of $5 million attributable to our acquisitions of Abacus and 360 Energy. Excluding the impact of the acquisitions, direct costs were lower by approximately $500,000 as we had a decrease in direct cost in the Energy Efficiency Services segment, resulting from organic decline we saw in that business this quarter. This decline was partially offset by higher direct costs, driven by the growth in the Engineering Services segment. Gross margin was 37.5% for the third quarter of 2015 compared to 41.6% for the third quarter of 2014. The decrease in gross margin is due to an increase in pass-through subcontractor costs from the acquisitions, which use more subcontractors. Relative to the second quarter 2015, our gross margin was essentially unchanged. General and administrative expenses for the third quarter were $10.8 million compared to $9.1 million for the prior year period. The increase in G&A was primarily due to poor project execution within Energy Efficiency segment. As a percentage of total contract revenue, our G&A expenses were 32.4%, essentially unchanged from the third quarter of 2014. Operating income was $1.6 million for the third quarter 2015 compared to $2.7 million for the third quarter of 2014. EBITDA was $2 million for the third quarter of 2015 compared with $2.8 million for the third quarter of 2014. EBITDA margin was 6%, a decrease from 10% in the same period in the prior year. The lower EBITDA margin is due to losses incurred within our larger programs in Energy Efficiency Services, segment which Tom will discuss later in the call. As in the first two quarters of 2015, we had a significant swing in our income tax expense relative to the prior year period. Income tax expense was $626,000 in the third quarter 2015 as compared to an income tax benefit of $1.5 million in the same period last year. The difference between income tax expenses this year versus last year is primarily due to recognition of an income tax benefit for net operating loss carry forwards that were fully utilized in 2015 and no longer available to offset taxable income this year. Net income for the third quarter of 2015 was $782,000 or $0.10 per diluted share compared to net income of $4.2 million or $0.53 per diluted share for the third quarter of 2014. The year-over-year decline in earnings per share is primarily attributable to the difference in income tax expense between the two periods as well as to a weaker performance in Energy Efficiency Services segment. Turning to our balance sheet, we had cash and cash equivalents of $60 million at October 2, 2015, an increase of approximately $900,000 from the end of the prior quarter. The increase was driven by positive free cash flow generated during the quarter. Our accounts receivable days outstanding were 73 days compared to 75 days at the end of the prior quarter. Now, turning to guidance, given the lower than expected revenue in the third quarter and our expectation that the performance of the Energy Efficiency Services segment will be fairly similar in the fourth quarter, we are now expecting full year revenue in 2015 to range between $130 million $135 million. We also expect full year EBITDA to exceed $10 million and we expect our effective tax rate to be approximately 42%. I would now like to turn the call over to Tom.

Thanks, Stacy. Good afternoon, everyone. I will get straight to the point. Our third quarter performance was disappointing. After six consecutive quarters of generating strong year-over-year organic revenue growth in our Energy Efficiency business, we simply did not execute well in the third quarter. Unfortunately, the shortfall in Energy Efficiency offset strong results in the Engineering, Homeland Security and Public Finance Services business. As Stacy mentioned, our are Energy Efficiency revenues were up 31% compared to last year, but all the growth came from our acquired businesses, which performed well in the quarter. The execution issues in energy efficiency were mostly related to the slow startup of new programs and insufficient progress made on deliverables for ongoing Energy Efficiency programs. To provide some background, our contract with utilities enabled us to revenue when we hit certain performance milestones. Such as having an end-user like a hotel or a hospital makes changes to their facilities that reduce energy usage. In general, we have made steady progress on the performance milestones each quarter, which has helped us to generate consistent organic revenue growth in the energy efficiency segment for the last year-and-a-half. However, this quarter, we just did not deliver up to our usual standards. There are many factors that we could point to, but at the end of the day we just did not do a good enough job of moving our customer engagements forward from the initial audit to actual retrofit implementation at our typical pace and hitting the performance standards, but we are confident that we can improve our execution going forward and get these programs back on track. The silver lining is that the total value of our Energy Efficiency contracts hasn't been affected. All the revenue-generating opportunities are still available to us. They would just be pushed into the later quarters. Outside of the program execution issues I just discussed, we had some very positive developments in Energy Efficiency this quarter. Both Abacus and 360 Energy had strong quarters and the profit they generated allowed us to offset the losses we experienced in the utility programs. Both firms are doing well winning new contract on their own and we also continue to have success in cross-selling, the performance contracting services to the end-users. They have a strong pipeline of projects building and 360 recently won the largest contract and its history. Overall, it was a good quarter in terms of new business development in Energy Efficiency. We have been selected and are in negotiation on several other significant programs with utility customers, which will positively impact 2016. The performance contracting capabilities we added to our recent acquisitions are a critical component in our winning bids as we continue to see a preference among utilities for doing business with firms that are capable of turnkey services. As I mentioned on our last conference call, we are awarded new contracts for eight community microgrids feasibility studies, which are part of the New York Prize microgrids competition. We are in the process of conducting these studies, which will be delivered between December and April, then we will find out how many of the projects we are involved in are selected to move on to the Phase 2 of the competition. Phase 2 is the design phase and the selected projects will receive funding to develop the design for the microgrid and prepare a detailed engineering construction plan. The experience we gaining through our work on these projects will be extremely valuable in positioning us as a leader in microgrid planning, development and implementation that we can leverage those other states for our microgrid initiatives. California is in the process of preparing a program similar to New York Prize, and we plan to be an active partner and bidder. We believe our early entry into the microgrid market will change our market position for the Company in the coming years as we see more funding being allocated this area. We are also very excited about what we are seeing in the area of local capacity requirements or LCR, which relates to increase in the amount of local generation in order to enhance the overall reliability of the grid. We are seeing more utilities issuing request for offers for LCR projects and we have already been selected for one significant program. As with microgrids, we believe that the emergence of LCR could develop into a sizable revenue opportunity for us in the coming years. Now turning to Engineering, Engineering revenues were up 4.5% over last year. For the first nine months of the year, Engineering revenues were up 7% over the prior year. Engineering continues to recover with more activity throughout California. We have a few more wins in the Bay area and in the Central Valley. With the financial health of municipalities improving, we are seeing funding mechanisms returning to California for infrastructure development, which is creating more contract opportunity for us to bid on. We have a nice pipeline of work in the Engineering segment and we expect to see continued growth in this area. Moving onto Homeland Security, our revenues were up 16% over last year. The largest project we worked on during this quarter with the San Francisco Bay area, full-scale exercise. This exercise includes the participation nine counties in three major cities in the Bay area and was designed to prepare for the 2016 Super Bowl that will be held in Santa Clara. Given the amount proposal activity we are seeing, we believe we have excellent opportunities to expand our customer base, particularly I can't say [ph] outside of the state of California. Finally, in Public Finance Services, our revenues increased 17.9% over the last year. We won $3.5 million in new contracts during the third quarter, which brought us to $11.5 million in new contract wins for the first nine months of the year. 25% of the wins in the third quarter were from municipalities outside of California, which is due to the ramp up of business development efforts in our Texas and Florida offices. In general, residential and commercial real estate development is continuing to pick up, which is driving demand for new financial programs, for infrastructure and municipal services. This has helped our financial services segment build a significant backlog that should enable us to continue growing this business in the coming quarters. On a final note, the third quarter was clearly a disappointment and the lack of execution will cause some residual impact on fourth-quarter revenue. However, we remain positive about our outlook given our strong pipeline of work for 2016. All of our existing major utility programs have indicated that they will continue at the current funding levels through 2016. On top of those programs, we have several significant new programs with utilities that are scheduled to start up in 2016. The cross-selling of services of 360 Energy and Abacus is going very well and many of the projects these businesses have won in 2015 will begin in 2016 and we have good momentum in the Engineering, Homeland and Public Finance businesses and should continue to see solid organic growth in these segments. In addition, we continue to have an active pipeline for attractive acquisition candidates and we are optimistic about our opportunities to complete more transactions that one enhances our competitive position create shareholder value. 2016 is shaping up to be a strong year of organic revenue growth. As we continue to grow revenue, we should see more operating leverage and a higher level of profitability. Next year, our EPS comparison won't be as challenging given that we won't be facing a dramatic difference in our tax rate like we were in 2015. Due to the promising outlook for 2016 and the long-term secular trends driving increased demand for Energy Efficiency, we continue to be very optimistic about our opportunities to create value for shareholders. With that, I would now like to turn the call back to the operator for Q&A. Operator?

Thank you. [Operator Instructions] We will go first to Al Kaschalk with Wedbush Securities.

Good afternoon, guys.

Hi, Al.

Hello.

Hello, can you hear us Al?

I can hear you.

Okay.

I want to just get right to obviously the topic and that is of, can you explain a little more detail, Tom, the cause I guess, and what is being gone what has been done to get you back on track in terms of the milestones that you did not make or meet?

I will group it into three areas. The first area, and I can name all the utility names, but the first area is, Con Ed, New York. Nothing has gone wrong with Con Ed, New York. It is just they added a lot of mods to us. We ramped up very strongly in the first and second quarters. At the end of last year, more mods were anticipating in new areas. If you recall, I talked about getting mods for low pockets of Brooklyn, Queens. We did not demand-side management worked, because end in point [ph] was going down. We ramped up with the amendments. We expected other areas to continue, but they did not going into the third quarter, so we fell back down to a baseline contract and that was a lower run rate and we did not change quickly enough, so the revenue was down and the profit went with it. That was one area. The second area would be the start up and the new contract, so it is only 12 month long. It is highly intensive, we moved people from New York to California to get it going and they are on the ground and we are four months into it and we have not been able to put the sales, when I say that sales and installation of the QC check on the sales and installations in order to build for revenue. If there is no revenue to match the start up costs, it has a significant impact and we sought that as our number two area. The third area would be some of our programs did not deliver the Energy Efficiency measures, so what that means though take hospital for example. If it did not install the energy-efficient measure, we cannot recognize the revenue in line with the effort it took to get them there, so if five or six projects like that delayed it has a big impact on revenue can take with expenses or costs, so those are the three areas that we got hit in kind of all at the same time in the same quarter. We do not expect to continue. We certainly are making the fixes. If you have any other questions or more detail, I will try to answer them.

In terms of the dollar amount, is there a way to think about this in a revenue or an EBITDA perspectives and is each of these categories equal weight or is one more meaningful than the other two?

I will give you a round number. Effected about $6 million in revenue, and I would say New York 40% start up of the new program with 40% and existing programs pushing through the end-user customer 20%, so on that $6 million, you got about $2.4 million to $3 million in New York, $2.4 million and a startup and the balance of the revenue shortfall is in pushing through things like hospitals. Does that answer your question?

Yes. I guess the question though, Tom, would be you are confident. We expressed confidence that this is behind you or you can quote get back on the pace and I am just wondering what gives you that level of confidence or what has changed since this has come up that you are able to put forth perhaps more of a statement reflecting 2016, because I think fourth quarters you are seeing it relatively flat.

Let us go to the three areas that caused the problem, Con Ed, again, it is not the slowdown. It is just a ramp down from the high usage, because of the amendments they poured in. We expect either new RFPs for new types of work to be added onto that basic at the end of '15 going into '16, so we will ramp up to a higher level again. That will fix the problem on that aspect. On the startup, we have not recognized any revenue on that that program and it does not go way. It just pushes forward, so actually accelerate revenue going into the end of '15 it into '16 through the first half of '16. On the other one, the pushing of customers is all pushed through the end of '15 into '16 to get the measures installed, so that is why I feel confident that we will not only maintain our base, but increase it. On top of that we have won new programs and they will be getting started right at the end of '15 going through '16, so this is a short-term blip and it is very disappointing and I apologize for it, but I do not anticipate in any way that it is a trend. It has got nothing to do with the customer base, backlog or anything like that. It is our execution.

Okay. Yes, so what I [ph] is basically three point of the $6 million revenue will be picked up over the near-term in the next one to two quarter type timeframe? Is that fair or is that?

I think quantified it as $6 million that we lost that will be picked up, plus I think more.

Why I am trying to parse this out and I do not mean to be splitting hair, but what it sounded like is the New York piece was something where you ramped down, so was maybe something that came new to the organization, therefore the business is not there.

Let me qualify, the Con Ed contract is steady and proceeding through '16. The amendments of the add-on that, ramped it up for specific projects, we finished them. They were not replaced, okay? We anticipated they would be replaced by maybe more add-ons. It is not going to happen in '15. It will happen, we think, in '16.

Okay.

The baseline Con Ed contract is going forward. That represented I said of the $6 million, I think I used the term 40%, so about $2.5 million. It could go as high as $3 million. The startup of the new contract on the $6 million shortfall represented another 40%, about $2.5 million, $2.4 million whatever comes up. That will be pushed into '16, because we will have that project ramped up and running here shortly. It won't be enough to help us with the issue. The programs with end users have to put in, installed the energy-efficient measures. We do not believe - we are going to see some of at the end of '15, but most of it will be in '16, so we are going to kind of stay where we are, make the corrections better and we have already done some of that, we are going into '16 strong.

Got it.

Does that answer more specifics the numbers you need or you want more?

No. That is helpful. I just want to ask the question about execution. The comment about poor project execution that is more that onus is more on you than it is your customer base? If so?

It is on all us.

What can we attribute that to?

I will give you a specific example, so we want start a contract. We put eight people on the ground in areas of sales, purchasing, line inventory, installers, we put them on the ground, we got to go out and make the sales. There is no revenue coming in. The revenue does not come in until the job is installed, the energy-efficiency is and is checked, so that we can invoice, so in the start of this particular project, we got behind in that how we track, how we pushed and how we spend our money without getting revenue for it, so we had about eight people on the ground plus inventory and about seven installers in addition to those running the program without any energy efficiency being accounted for a revenue taken. On Con Ed, as it ramped down, we are heavy in people, so there is another indication. Does that answer your question where we screwed up?

Yes. No that is great. The good thing there was some a lot road to plough here dirty soil and we continue to make progress. I think, just one final clear up question for me. Generally, there is some fourth quarter weakness because of holidays or seasonality weakness because of the holiday, number of holidays. You said that energy efficiency, I think, would be comparable to the Q3 level. What about the overall revenue for the Company in the fourth quarter as you looked at the $33 million, $34 million level, because last year you actually I think were at around $30 million, so do we see a sequential flatness year-over-year? Just talk a little bit about that to the extent that you can.

We are seeing about $33 million $34 million level fourth quarter of 2015.

Okay. Very good. Thanks a lot.

Okay.

We will go to the next question. It comes from Wyatt Carr with Monarch Bay.

Hi, Tom and Stacy.

Hello, Wyatt.

Hi, Wyatt.

The question I have is more along the lines of the acquisitions that you made with the Abacus and 360; you had the subcontract had a lot of business in the last quarter and you only had those acquisitions for partial of the quarter. Did you experience the same thing with those acquisitions this quarter? If so, to what extent and where are the margins within the acquisitions, were they as you expected or above or below?

Wyatt, the subcontracting amount was almost the same between Q2 and Q3, very similar. Margins go up with the acquisitions this quarter due to seasonality that is just a natural part of their business. Q3 is their big time coming up towards the end of the summer, so that is the normal seasonality, so margins improved in Q3 over Q2. Wyatt, does that answer your question?

To some extent, I mean, I guess the question I have is, were the revenues from the acquisitions above or below expectations for you.

We got them on January 15th of this year, so we have had them for basically two-and-a-half quarters and they are pretty much on plan.

Okay. Their margin contribution -

Go ahead.

Their margin contribution, because their margins were higher than other Energy Efficiency Services, is that correct?

Yes. They basically covered up the problem we had on the other three projects and they only had, I do not remember the revenue number, but $7.5 million for the quarter. Their margins are significantly higher.

All right, and just a question on the on the performance contracts, if I understand you correctly. You have to deliver a certain amount of performance of energy savings and to hit the milestones. If you do not then tell me what happens.

Well, for the utilities, we have to install the energy efficient measures, whether that would be lighting, whether that would be HVAC, whether it would be chillers. Once they are installed, there is three ways to recognize revenue. It is going out and doing the audits, selling the job then actually the customer ordering the energy-efficient measures and then the third one is, it actually is installed and working and signed off by utility. Along the way, it is kind of like percent complete, and as you spend money get it done and it pushes, that does not get either ordered or installed then you are sitting there as we are with the problem, but that is one way to do it. All the contracts will look different, so it is not really a performance contract in the sense you may be thinking like ESCO we get the energy savings pay us.

Right.

We just have to get it installed and working and the calculations for what gets installed and working are all done by the utility, so let us make it real simple, one light bulb, tells you how many kilowatt hour saved has no and they pay you for the whole thing, labor, cost of materials are all worked into one measure price, so you do not have to - you just need to get it installed and verified that was installed.

Okay.

Calculated how much is saved.

Tom, how much lead time do you have like with Con Ed in these amendments that they add-ons and then when they finished out how much lead time do you have where you can right-size if your workforces?

It goes like this, like the army hurry up and - when we can do it, we are going to do it. Then all of sudden you do it and say have not done tomorrow. It is fluid.

I got you, so it is something that is somewhat difficult to project?

Unless it is the marginal smaller add-on, there is a long long-term three-year contract. We have a pretty good idea of how much we are going to deliver per month, how many sites we got to visit, how many audits we have to do and they have put in a $7 million, $8 million mod and then they say you got three weeks to do it, but you have been talking about for three months and is no knock on the utility. This is they are highly driven by the regulatory commissions in each state. These modifications in what they want to do have to go through state approval as well, so these things can drag on and on and on. We are in the negotiation with contract now that would go on probably for a year-and-a-half. Then when it gets done it is full steam ahead, so it is not an easy thing to predict, Wyatt.

I understand.

On our part, nor the customer's utility.

Okay. That is pretty much for me.

All right.

Thanks sorry [indiscernible], Wyatt. But it is not going to stay, okay?

I understand.

All right. Next question?

We will move to the next question. It comes from Abhi Ramesh with Apollo.

Hey, guys. How is it going?

Hi.

Just a quick question, I know that the sort of publics finance and like Homeland Security those are kind of much smaller portions of the pie, but what is the kind of general outlook there are you guys anticipating those things to be flattish, are there any catalysts there?

We expect engineering to be flat to 5% growth maybe; it is between 5% and 10%. We expect financial services to be between 5% and 10%. Homeland, the pipeline that we are looking at now could be better, but it is so small, it really won't move the needle on us, but they are all on a plus end of organic growth.

Got it. That is helpful. Separate from that, when you guys are looking at sort of potential acquisitions moving forward, I assume it is going to be primarily for the Energy Efficiency division, but what do you kind of look for when you guys are looking at potential acquisitions?

Mike is going to be answering this one. He has raised his hand at me.

We have a couple of holes in our offering that we need to address. One of them is Northeast engineering. We need to add high-end energy consulting work to the utilities, policy-type work, management consulting offering. We need to add additional geographies with performance contracting and we are looking at that. Right now, we have the Midwest and West covered, but much of the country is not covered right now, so those are the types of strategies we are looking for. In terms of financial metrics, we want all of our acquisitions to be accretive on a GAAP basis in the first 12 months. That is a criteria that we look at. We want in general businesses that have margins similar to us or higher and we will look at discounted cash flow to backup those metrics.

Got it. That makes sense. That is all I got from my end. I appreciate it.

Thank you.

[Operator Instructions] We will go next to Adeeb [indiscernible] Capital.

Hey, Tom and Stacy. Good afternoon.

Hi.

Thanks for taking the question. I have a question about the Energy Efficiency business. How much of the business is on a fixed price contract and solve the issues that you saw in this quarter, how much would you attribute due to it being fixed price or anything you can [ph] do to mitigate some of the risk because of that?

Our fixed price work within that segment is about 42%. I would say, we would be consistent on that amount to fixed price work. I think I missed the second half of your question if you would not mind repeating it?

Like the three parts that Tom moved down like especially the hospitals and the ramp up in California. I mean like revenues not being realized, but the cost going into people, would that different it would not be a fixed price contract? I am just trying to understand.

That specific job is unit based. It is just we are ramping up at this point and we are incurring costs, but we are unable to recognize revenue on those costs currently.

As part of the contract you had to move people you said from New York to California. Are some of those costs reimbursable and are those built into the contracts when you do it for them?

Reimbursable, no. It is a cost that goes against the project and we just have to offset it with more revenue. I do not know - it is not a reimbursable time and materials or cost plus- type contract, so we get paid. I give you the big picture on that one. There is about 1,500 sites we have to visit and install lighting or HVAC energy savings measures. We have a crew of about six to eight installers when it is ramped up fully. We have a sales force of about three people and then we have a warehouse management. Those cost go against the 1,500 facilities and we get paid so much per light, so much per HVAC unit installed, so that is your revenue and it is called energy savings measure. If you install a light or the light above your head you may get paid $90 to change it from a T12 to T8, so you generate $80 for that site or that particular light. We might do 400 in the building. That is your revenue for the day. Your cost, all the costs for your sales and for inventory and labor, so it is just basically costless good sold.

It is okay.

I am not an accountant, so I am trying to put it in the accounting terms.

Yes. That is helpful. Different kind of question, the margins of the business has been improving throughout and then obviously this quarter, would you say is the long-term margin profile for the combined business?

Well, that is always the changing. We were headed towards a solid 8%, 9% trying to achieve 10% and then the performance contracting businesses, although they have a high margin on their work, there is a lot of pass-through costs, so we are kind of backed five years and those construction costs have a lower margin on it. Unfortunately, we get accounted as our revenue, so that drives down margin relative to revenue. We think as the construction portion ramps up, we will see margin compression relative to revenue.

Okay. Thank you. No more questions.

Mike you want to? Mike is looking at and look me like I am crazy, but I am not saying. Mike does not want to say anything more, so the more pass-through the worst it gets, so we have to find the way you correct that. If you remember, we had a lot of pass-through five years ago if you were with us and we corrected by self-installing and get better margin on that. We do not have that same opportunity when we get into turnkey, so. Any other questions?

Sir, we have no further questions at this time.

Okay. Let me take a look here. Well, thank you. I see this as a blip. There is nothing in terms of our base business, our programs, and our performance, with our customers that would say this is indicative of anything other than we failed to perform on three contracts all at the same time at the highest level and most of it was in our control. We are correcting it and we will be going forward and we have more wins and we will be adding on to our base that we are already growing from. Thank you for your time. Thank you for being on the call.

That concludes today's presentation. Thank you for your participation.